The recent New Jersey law [PDF] condoning sports betting at the state's casinos and racetracks has sparked much debate about the integrity of sports and the law's constitutionality. The Professional and Amateur Sports Protection Act (PASPA) has been in effect since 1992, alleging even through its name that gambling is harmful to all sports. PASPA prohibits government entities from sponsoring or allowing others to sponsor sports "betting, gambling, or wagering scheme[s]."
This does not apply to all government entities, however. The act grandfathers in those states which had allowed sports gambling between 1976 and 1990 or those states which had conducted sports gambling operations between September 1, 1989, and October 2, 1991. The final entity exception allows for gambling that was authorized within a year of the act's effective date and conducted in state-operated casinos which existed for ten years prior to that effective date. These three exceptions effectively exempted Oregon, Delaware, Montana and Nevada from the PASPA ban. New Jersey would also have been an exception to the law if it had enacted a sports wagering law within the given window. Atlantic City has long been a casino hot spot, and that exception was passed with New Jersey specifically in mind.
However, New Jersey did not act within that time and did not pass any sports gambling laws until this year. Governor Chris Christie, searching for new revenue sources for the state, signed the Sports Gambling Law in January. He acknowledged that this defied PASPA and challenged anyone who wished to deter him: "If someone wants to stop us, then let them try to stop us ... am I expecting there may be legal action taken against us to try to prevent it? Yes, but I have every confidence we're going to be successful."
In August, Christie's challenge was accepted New Jersey was sued by five major sports governing bodies, each alleging the state's new law violates PASPA and harms the integrity of sporting events. The National Collegiate Athletic Association (NCAA), the National Football League (NFL), Major League Baseball (MLB), the National Basketball Association (NBA) and the National Hockey League (NHL) collectively filed suit in the US District Court for the District of New Jersey in Trenton. The organizations are concerned that with more gambling outlets, more corruption and game fixing will occur. The NCAA in particular is concerned that their young athletes are especially susceptible to point shaving or other fixing schemes, and legalized sports gambling will exacerbate the negative influences that surround them. The organizations also believe that with fewer gambling opportunities, teenagers and other likely gambling addicts will be kept away from temptation.
Christie had previously stated that his state would not explicitly challenge the constitutionality of PASPA. Yet through the recent filing against them, NCAA v. Christie, New Jersey has the opportunity to defend its own actions by challenging the act's legitimacy. Christie is leading the charge, after State Senator Raymond Lesniak failed in 2009 on a similar lawsuit due to procedural issues.
PASPA could be seen as unconstitutional in two ways: First, Congress may be found to have acted outside its 10th Amendment authority in regulating gambling activity. States are given any power that is not expressly delegated to the federal government or expressly denied to the states by the Constitution. Gambling fits neither of these categories, and thus, state gambling proponents aver that only states can regulate gambling activity.
This is further strengthened by the fact that, since Internet gambling will remain illegal in New Jersey, the entire gambling transaction would take place within the state. Congress, with some exceptions, has the right to regulate only interstate, not intrastate, commerce. However, since gambling has a significant effect on interstate commerce, courts may disregard this part of the argument.
The second argument against PASPA is its disparate state application. With certain states exempted from the act's prohibitions, there is likely discriminatory treatment at hand. Some scholars argue that the Commerce Clause requires uniform state treatment. However, there are US Supreme Court decisions that currently refute that reading. State gambling proponents will essentially have to ask the court to read the uniformity requirement back into this clause in order to succeed on this line of reasoning.
Perhaps the most convincing argument is not a constitutional one, but a practical one. Allowing states to host sports gambling operations will provide a revenue source that many states desperately need. Reuters and The Huffington Post reported in 2011 that the combined state debt in the US was between $2 and $4 trillion. California leads the pack, with a 2011 debt of between $300 and $600 billion.
The American Gaming Association (AGA) reported that $2.88 billion was wagered in Nevada alone on sports in 2011.These bets provided revenue of $140.7 million for Nevada's sports books. Revenue-hungry states like New Jersey could benefit from the taxes on these bets and gambling's typical side effects, such as increased tourism and employment demand. The AGA estimates that legal sports gambling attracts upwards of 30 million visitors to Nevada each year and employs thousands of people. The federal government should encourage state revenue-producing activities to relieve the heavy burden that state need places on the federal government.
It is also foreseeable that the illegal sports gambling which now occurs, at a rate of around $380 billion in wagers per year, would decrease if there were more legal sports gambling outlets. Not everyone can travel to Nevada to place a wager on March Madness, but it is the only state with legal college sports betting. Delaware is currently the sole East Coast city that offers any sports betting, and it is limited to NFL parlay betting. Perhaps now that New Jersey allows sports gambling, those gamblers tempted to bet illegally will instead be inclined to participate in legal opportunities.
The argument that this will harm sport's integrity is a tenuous one. With five states already allowed to sponsor sports wagers, the damage is either already done or does not exist. An increase in state-sponsored sports gambling does not logically increase the harm: either people bet on the games or they do not. It is clear that those who wish to bet illegally will find ways to do it regardless of federal laws. Christie acknowledged this dichotomy: "[W]hy is this more injurious than illegal sports gambling to the operations of the league or the NCAA?"
While Congress and the current Plaintiffs argue that increased state gambling will lead to increased fixed games, the opposite has anecdotally proven true. One article points out that many major point-shaving or inside-information scandals have been exposed by bookkeepers that have a strong financial interest in gambling integrity. When gambling is state-regulated, those states can also regulate who is gambling, and thus keep out underage or addicted gamblers.
This case provides an interesting forum for both constitutional scholars and sports fans alike. With the ever-controversial NCAA on one side and the highly-visible political figure Christie on the other, it promises to bring excitement to the New Jersey courts. As Lesniak said regarding the suit: "[L]et the games begin."
Kathryn Young is a Programs Editor for the Virginia Sports and Entertainment Law Journal and is President of the Sports Law Society. She completed her undergraduate studies in Political Science and History at the University of North Carolina Chapel Hill.
Suggested citation: Kathryn Young, New Jersey Sports Betting, JURIST - Dateline, Oct. 10, 2012, http://jurist.org/dateline/2012/10/kathryn-young-nj-gambling.php.
This article was prepared for publication by Emily Osgood, an associate editor for JURIST's student commentary service. Please direct any questions or comments to her at firstname.lastname@example.org